Novo Holdings, the holding and investment company owned by Novo Nordisk, announced Monday that it will acquire Contract Development and Manufacturing Organization (CDMO) Catalent in a $16.5 billion cash deal. The move aims to rapidly expand production capacity for Novo Nordisk’s obesity drug Wegovy (semaglutide), which has faced massive demand and supply shortages globally.
Key Details of the Acquisition
- Novo Holdings will pay $140 per share for Catalent, a nearly 40% premium on the stock’s closing price on Friday
- The deal values Catalent at about $16.5 billion including debt
- Catalent shareholders will vote on the deal, which is expected to close in Q2 2024
- Novo Nordisk will acquire 3 Catalent fill-finish sites in the US for $1.1 billion as part of the transaction
The purchase of Catalent, a leading CDMO focused on biologics and advanced therapies, will significantly boost Novo’s manufacturing capacity for Wegovy and other GLP-1 based obesity therapies.
Novo has struggled to meet surging demand for Wegovy since its launch in 2021, with orders far outstripping supply globally. The acquisition provides urgent capacity relief to address supply shortages.
Driving Force Behind the Deal – Soaring Demand for Wegovy
Wegovy has been hailed as a “game-changer” in treating obesity since gaining FDA approval in June 2021. The once-weekly injected drug promotes weight loss by acting like the hormone GLP-1 to suppress appetite.
In clinical trials, Wegovy helped patients lose an average of 15% of their body weight over 16 months on the highest dose.
This unprecedented efficacy in a weight loss medication has triggered skyrocketing demand from patients and doctors alike.
Novartis CEO Lars Fruergaard Jørgensen cited “extraordinary global demand, far exceeding expectations” for Wegovy and its sister diabetes drug Ozempic (semaglutide) as the key driver behind Novo’s decision to acquire Catalent.
| Quarter | Wegovy Sales (DKK billion) | Year-Over-Year Growth |
|---|---|---|
| Q3 2022 | 5.6 | – |
| Q4 2022 | 9.1 | 62% |
| Q1 2023 (expected per Novo guidance) | 13-15 | ~60% |
Catalent adds significant production capacity for Wegovy and other critical growth drivers:
- 3 dedicated fill-finish lines for injectable products like GLP-1 receptor agonists
- 5 microbial lines suitable for producing APIs like semaglutide
- 130,000 sq ft warehouse for storage and distribution
The deal will also allow Novo Nordisk to utilize Catalent’s expertise in developing innovative biologic drugs and capacity for new growth opportunities beyond semaglutide.
What Does This Mean for Novo Nordisk?
- Provides rapid relief for Wegovy shortages which have frustrated doctors and patients
- Boosts Novo’s capacity to capitalize on the booming obesity treatment market
- Secures supply for other essential growth drivers like Ozempic
- Further cements Novo Nordisk as the leader in metabolic disease therapies
Cowen analyst Steve Scala projects the acquisition could expand Novo’s semaglutide capacity from 60 million weekly doses currently to 100 million by end of 2024. This is essential to meet global demand which Scala estimates could reach 90 million doses this year.
The market has responded positively, with Novo Nordisk’s share price up 6% in early Monday trading on the news. As blockbuster sales for Wegovy and Ozempic continue to accelerate, the deal provides Novo supply security to maximize their potential well into the future.
What Are Experts Saying?
“This move should put to rest concerns about Novo’s ability to supply semaglutide products for years to come as uptake continues to surpass expectations,” – Steve Scala, Cowen & Co.
“Securing manufacturing capacity has been management’s top priority for 2023. Today’s news delivers on that priority,” – Wimal Kapadia, Bernstein Research
“We see today’s transaction as further evidence to support Novo Nordisk’s industry leading commitment to patients” – Richard Vosser, J.P. Morgan
Outlook and Next Steps
Catalent shareholders still need to approve the transaction, though analysts expect little resistance given the high premium offered. The deal is forecast to close sometime in Q2 2024.
In the meantime, Novo will begin working with Catalent to rapidly incorporate the new capacity into its production plans for semaglutide products. This should enable Novo to accelerate supply recovery through 2024 to meet soaring global Wegovy demand.
The market will be monitoring closely for signs that Novo can fulfill orders for physicians wanting to prescribe these obesity medicines to eligible patients.
For Novo Holdings and Novo Nordisk, successfully integrating Catalent and ramping up output will be critical to capitalizing on the immense possibilities of Wegovy and sustaining growth over the long-term.
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